W2 Chicken Update: Russia's Duty-Free Quota Decision and Shifting Patterns in European and Ukrainian Markets

Russia Accepts Applications for Duty-Free Chicken Meat Imports, Expects Stabilization Amid Rising Prices

The Russian Ministry of Agriculture has accepted new applications to supply 225.98 metric tons (mt) of chicken meat under a duty-free quota, with the initial batch being 43.2 mt. The official decision on acceptance or refusal for both new and existing batches is pending. Critical details such as the importing country and distribution plans remain undisclosed. Once a decision is made, the Ministry will issue necessary import documents and update the official website with data on remaining volumes eligible for tariff benefits, currently standing at 140 thousand mt.

Proposed by the Ministry of Agriculture, the decision to allow the duty-free import of specific volumes received unanimous support at a government subcommittee meeting on Dec-23. The origin of these products is unspecified, likely involving supplies from “friendly nations.” The approved benefit permits the supply of up to 140 thousand mt of frozen boneless chicken meat, breasts, and pieces with specific commodity codes until June 30, 2024.

The Ministry of Agriculture projects that duty-free chicken meat imports will stabilize prices and prevent shortages, aligning with the import substitution policy, as the supplies originate from friendly nations such as China, India, Brazil, Türkiye, Kazakhstan, and Belarus. Chicken prices in Russia have risen by nearly 20% year-on-year (YoY), nearing USD 2.26 (RUB 200) per kilogram (kg).

Ukrainian Poultry Exports Surge in Volume, Yet Face Profit Challenges Amid Price Fluctuations

While historically robust, European and Hungarian poultry production are experiencing gradual decline in strength, partly attributed to the broader repercussions of the Russia-Ukrainian war. Notably, Brazil and Thailand are emerging as beneficiaries in the global poultry market. The European Union’s (EU) foreign trade in poultry, led by major contributors like Spain, Poland, Germany, France, and Italy, maintains a positive balance with an annual production of approximately 14 million metric tons (mmt), of which 80% is chicken. Despite a stable production level, the EU is witnessing a weakening in its foreign trade position. Imports from Brazil and Thailand are rising, while exports are gradually decreasing.

Ukraine, a major supplier, has significantly increased its chicken meat exports to the EU, causing a 7.5% surge in imports, highlighting the geopolitical impact of the war. The Brazilian Animal Protein Association acknowledges its role in filling the void left by Ukrainian and Russian production and exports. Resilient and vertically integrated, the Ukrainian poultry sector faces challenges such as rising production costs, energy shortages, reduced domestic consumption, and logistical issues amid the refugee crisis and export challenges. Based on Ukrainian customs service data for 2023, poultry meat exports from Ukraine totaled 425 thousand mt, amounting to USD 800 million. This signifies a 3% YoY increase in volume. However, a 6% YoY decline in export profits occurred due to reductions in the average selling price.

Export prices reveal fluctuations, with the average price dropping from USD 2.2/kg in H1-2022 to USD 1.7/kg in H1-2023. While there was a temporary increase during the summer, the price settled at USD 1.9/kg in the final months of 2023. Poultry price variations are attributed to a substantial decrease in global grain and oilseed prices, resulting in lower chicken production costs. Despite increased production in 2023, Ukrainian poultry output is unlikely to reach pre-war levels, with exports focused on the EU and the Middle East. However, the long-term sustainability of this export orientation may face challenges from increasing competition in the global poultry market. While currently the main export market for Ukraine, the EU may see intensified competition in the future, posing potential threats to both European and Ukrainian domestic poultry sectors.